Feds: Mormon bishop ran Ponzi scheme

The News-Times, Connecticut/March 27, 2012

Bridgeport -- A former Bridgeport-area Mormon bishop bilked investors, including members of his Trumbull congregation, out of more than $400,000 in a Ponzi scheme, federal authorities alleged Tuesday.

In an indictment handed up Monday by a grand jury in Bridgeport, Julius Blackwelder, 59, is charged with soliciting investments from congregants and other victims in a wide-ranging scheme he ran while serving as bishop of the Bridgeport Ward of the Church of Jesus Christ of Latter-day Saints.

U.S. Attorney David Fein said in a statement Tuesday that Blackwelder "is alleged to have abused his position of trust as a leader in his church to defraud fellow church members and others out of hundreds of thousands of dollars."

If convicted, Blackwelder faces up to 20 years in federal prison on each count of mail and wire fraud and 10 years on each count of money laundering.

Calls to the LDS church office in Trumbull and to Sarah Merriam, the attorney representing Blackwelder, were not returned.

Blackwelder guaranteed investors' principal and a specific return on their investments, authorities said. He documented his misrepresentations to investors in promissory notes and offered clients fake memoranda and account updates that he prepared.

Fein's office said Blackwelder used investors' money to pay his own expenses, which included repaying earlier investors in the scheme, building a waterfront home in Stratford and paying personal bank loans, including a line of credit from a bank receiving funds from the Troubled Asset Relief Program.

In June 2011, the Connecticut Department of Banking issued a cease-and-desist order directing Blackwelder to make restitution because he was allegedly selling fraudulent notes.

The state banking department said Blackwelder sold several unregistered promissory notes in violation of the state Uniform Securities Act and said he would manage and invest certain investors' funds to achieve a guaranteed return of 20 percent and 25 percent.

Thomas Carson, a spokesman for Fein's office, said in a release that the indictment has been handed to Senior U.S. District Judge Ellen Bree Burns in New Haven.

The case is being investigated by the U.S. Postal Inspection Service, the Special Inspector General for TARP, the IRS and the state Department of Banking, Carson said. Special Assistant U.S. Attorney Jonathan Francis and Deputy U.S. Attorney Deirdre Daly are prosecuting.

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